From 1990 to 2017, the distinct number of U.S. active equity and
fixed-income funds grew from about 1,900 to roughly 8,500.
Simultaneously, the number of fund manager positions increased. But
for most of the last three decades, the growth in portfolio manager
jobs have disproportionally benefitted men. Men have captured nearly
all the newly created roles—about 85-90%. And women have failed to
make significant gains.

We wanted to see if there was a rational explanation for the lack
of women in the fund management industry. So in our latest study, we harnessed Morningstar's
U.S. database of mutual funds and their managers to consider whether
performance differences between managers is driven by gender.

How we structured our study on the performance of female fund
managers

We set to answer two distinct questions:

How does gender diversity of management teams affect
fund performance?

On a peer-relative basis,
do male and female fund managers have different performance track
records based on their gender?

To answer this, we created two datasets: one designed to track fund
performance and the second designed to track manager performance. For
both datasets, we applied the same industry standard performance
tests: regression, portfolio-based tests, event study. As a result, we
believe we have a holistic view of the impact of gender diversity on
investment performance. You can find our full results in the paper “Fund Managers by Gender – Through the Performance Lens.”

Our findings: Women are just as good as men at managing funds

In our study, we find that performance does not explain the low
participation rate of women in the fund industry. And the idea that
men have outperformed was not supported in the data either. Plus, as
is discussed further in the paper and below, we believe we can find
some indication that the industry might be better off with more women
at the helm of funds.

What we found about gender and fund performance differences

In our study, we tackled the hypothesis that men produce superior
performance when it comes to managing funds. Using that as our
framework, we expected to find that funds exclusively run by men would
outperform funds run by mix-gender teams, and that funds run by women
would be the least successful. Similarly, managers who are men would
outperform managers who are women. However, we found clear evidence to
reject this hypothesis. We tested this theory in three ways, which all
point to this same conclusion: We do not find a performance difference
based on a fund manager's gender.

In one of our tests, which is illustrated below, an investor who
picks a fund based solely on the manager’s gender could see better
results with all-female fund teams in both equity and fixed-income
asset classes.

What we found about gender and manager performance differences

In our study, we also controlled for certain known drivers of fund
returns to evaluate this hypothesis that men outperform women. But the
results showed that gender has no statistically significant difference
for managers in either equity or fixed-income asset classes.

Why do we believe it’s important to look at fund manager
performance by gender?

We recognize that studying fund manager performance by gender is a
polarizing topic. Our goal isn’t to estimate a manager's performance
potential based on gender. Rather, we wanted to see whether
performance explains why the participation rate of female fund
managers has declined. In effect, we are asking: Would the industry
perform worse with more female fund managers? If there’s no overall
persistent difference in investing with men over women in terms of
fund performance, then investment skill is not a sufficient
justification for the lack of women in fund management positions.

What’s next?

We plan to continue exploring the topic of fund management
diversity—whether that research is focused on gender or educational
background, such as advanced degree types or professional
certifications. We hope our conclusions could be used raise awareness
and to further conversations of diversity within the fund industry.

Read the full paper “Fund Managers by Gender –
Through the Performance Lens.”

The information, data, analyses and opinions presented herein do
not constitute investment advice; are provided solely for
informational purposes and therefore are not an offer to buy or sell
a security; and are not warranted to be correct, complete or
accurate. The opinions expressed are as of the date written and are
subject to change without notice. Except as otherwise required by
law, Morningstar shall not be responsible for any trading decisions,
damages or other losses resulting from, or related to, the
information, data, analyses or opinions or their use. The
information contained herein is the proprietary property of
Morningstar and may not be reproduced, in whole or in part, or used
in any manner, without the prior written consent of Morningstar.
Investment research is produced and issued by subsidiaries of
Morningstar, Inc. including, but not limited to, Morningstar
Research Services LLC, registered with and governed by the U.S.
Securities and Exchange Commission.

Follow Morningstar

The Morningstar name and logo are registered marks of Morningstar, Inc. Opinions expressed are subject to change without notice. This commentary is for informational purposes only. Advisory and discretionary management services are provided by one or more Morningstar, Inc. subsidiaries, which are authorized in the appropriate jurisdiction to provide such services. For more details, click here. The information, data, analyses, and opinions presented herein do not constitute investment advice, are provided solely for informational purposes and therefore are not an offer to buy or sell a security. Morningstar has not considered any individual’s circumstances in preparing this information. Before making any investment decision, please consider consulting a financial or tax professional regarding your unique situation and consider the relevant disclosure document.